Figure 27-3

-Refer to Figure 27-3.In the dynamic model of AD-AS in the figure above,if the economy is at point A in year 1 and is expected to go to point B in year 2,Congress and the president would most likely
A) increase the money supply and decrease the interest rate.
B) increase taxes.
C) increase government spending.
D) increase oil prices.
E) raise interest rates.

Question

Figure 27-3
 
-Refer to Figure 27-3.In the dynamic model of AD-AS in the figure above,if the economy is at point A in year 1 and is expected to go to point B in year 2,Congress and the president would most likely
A) increase the money supply and decrease the interest rate. 
B) increase taxes. 
C) increase government spending. 
D) increase oil prices. 
E) raise interest rates.

Quizplus · Accepted Answer

If the economy is moving from point A to point B, it suggests an overheating economy with potential inflationary pressures. To counteract this, Congress and the president would likely increase taxes to reduce aggregate demand and cool down the economy.

Figure 27-3 -Refer to Figure 27-3.In the Dynamic Model of AD-AS in Model